5Reasons the New York Fed Isn’t Happy With Deutsche Bank

The Federal Reserve Bank of New York has given Deutsche Bank a talking-to – which went unreported until today – over a range of problems the regulator says compromise the bank’s ability to meet toughening reporting standards.

The Wall Street Journal got a look at recent communications between the New York Fed and the German banking giant. Here are five points that Daniel Muccia, the senior bank supervisor with oversight over Deutsche Bank, made to the bank’s executives in a sharply worded letter on Dec. 11, 2013.

A Deutsche Bank spokesman said the firm is “working diligently to further strengthen” the bank’s systems and controls.

22 Jul 2014 5:29pm

By

Jenny Strasburg

1Get your business lines in order.

Calling this a “matter requiring immediate attention,” the regulator said the different divisions in the bank exhibit a “lack of ownership” in producing and validating the data that flows into important regulatory reports. It cited “coding errors” and insufficient documentation, as well as “poor coverage by internal audit and compliance” staffers.

2We’ve had this conversation before.

The regulator blasted Deutsche Bank for what it said should feel like déjà vu on both sides. It said the New York Fed since 2002 “has highlighted significant weaknesses in the firm’s regulatory reporting framework that has remained outstanding for a decade.”

3These things are public.

Besides the “longstanding, unresolved” nature of multiple issues, the regulator reminded the bank of “the public nature of regulatory reports.” Another reason immediate attention is required, the regulator said.

4Too much human control at the keyboard.

Too many Deutsche Bank financial stats get entered manually – in one example cited, there were 800 pieces of data adding up to some $337 billion in value subjected to “multiple manual adjustments.” That has to change, the New York Fed said. Directive: The bank is “required to immediately ensure that automation efforts to improve the quality of regulatory reports are effectively executed.”

5Bosses, you are on the hook.

The examiners called on “senior management of the banking organization” to make and enforce changes to ensure that finance and technology staff across the bank are accountable for accurate regulatory reporting. The regulator called out senior managers for declaring internal victory too soon in the past when “the root causes of these errors were not eliminated.”